...February 5, 2013 TAX FILE MEMORANDUM To : Prof. C. Cruz From : Vidia Mamesah Subject: Research Problem 1 Murray Today, I spoke with Mr. Murray with respect to his letter regarding tax assistance. He wants to know that his recent award for damages to his personal and professional reputation is taxable. Mr. Murray reported to the Environmental Protection Agency that his employer was illegally dumping chemicals into a river. His charges were true, and Mr. Murray’s employer was fined. In retaliation, Mr. Murray’s employer fired him and made deliberate efforts to prevent Murray from obtaining other employment. Mr. Murray sued the employer, claiming that his reputation had been damaged. Mr. Murray won his lawsuit and received an award for damages to his personal and professional reputation and for his mental suffering. He argues that he was awarded damages as recovery of his human capital and a recovery of capital is not income. Therefore the Federal government does not have the power to tax the award. ISSUES: Is the recent award taxable? Income exclusions: damages on account of personal injury or sickness-physical vs. emotional injury. CONCLUSION: Section 104(a) (2) provides that excludes from gross income the amount of any damages (other than punitive damages) received (whether by suit or agreement and whether as lump sums or as periodic payments) on account of personal physical injuries or physical sickness. Emotional distress is not considered a physical...
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... What role does professional research play within an accounting firm or department? Who primarily conducts the research? Government, accounting, auditing, and tax research is significant to an accounting firm or department. The professional research is conducted by accountants and they are in charge of interpreting firm policies in the framework of particular clients. Resolving technical and auditing issues during a client engagement; this is done by research units when the local office is not able to come up with the conclusion. 7. Identify and explain some basic questions the researcher must address in performing accounting, auditing, or tax research. The researcher must ask the following questions when performing accounting, auditing, or tax research: A. Do I have complete knowledge to answer the question, or must I conduct research to consult authoritative references? B. What is the law (tax law) or authoritative literature? C. Does the law or authoritative literature address the issue under review? D. Where can I find the law or authoritative literature and effectively and efficiently develop a conclusion? E. Where can I find international accounting and auditing standards? F. If there is no law or authoritative literature directly addressing the topic at issue, what approach do I follow in reaching a conclusion? G. What professional databases or other sources on the Internet should I access for research process? H. If more than...
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...Muhammad U Khan DeVry University ACCT 429: Federal Income Taxation Professor Deanna King Research Essay Assignment 1 Passive loss limitations were introduced in the Tax Reform Act of 1986, and were designed to limit a taxpayer’s ability to use rental or business losses to offset other income. The regulation limited losses to a fixed dollar amount, and also limited the total loss exposure to the amount of investment and leverage commitment (basis and at-risk limitations). By taking such measure the regulation did succeed in limiting such investments but still did not completely eliminate them. According to irs.gov oil and gas activities in which the tax payer has a working interest with the entity with an unlimited liability is un-effected by the passive loss limitation. What that means is that if the taxpayer owns interest in an oil and gas activity via a joint venture, his liability will not be limited. The passive loss limitations will not be applied. Losses or income will be non-passive. Energy Investments, Inc. Energy Investment Inc. with its online offering at http://www.energyinvestmentsinc.net/index.php?&page=why&keyword=oilgas&gclid=CJvJ-OrxwLgCFYyd4AodZicAHw, is offering an annual return of 20-80%. As mentioned on the above website the return rate is determined from a ‘depletion allowance’, ‘high financial rewards’ and a “hedge against inflation”. The company also mentions “Return of Capital in 6 to 12 months Better than 10 to one Return on...
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...Week 7 Research Project (Set #1) DeVry University Acct 429 TAX RESEARCH MEMORANDUM ASSIGNMENT 2 It appears as though a couple of your clients have encountered an unfortunate development in their financial situation. Cindy and Ralph Edmonds own TidyCo., Inc. TidyCo, in turn, owns and operates several coin Laundromats in and around Dubuque, Iowa. Over the last two years, the Edmonds made weekly deposits of the Laundromat receipts to corporate and personal bank accounts. However, it now also appears (unknown to you!) they also siphoned off a portion of the weekly collections and took them home rather than depositing them. These amounts, which appear to total about $200,000 were hidden in shoeboxes around the house and (surprise!) were not reported as income. The IRS found out about these amounts and has notified them that it intends to bring criminal tax evasion charges against them under Section 7201 of the Code. The IRS has made quite clear that it believes that the Edmonds’ actions constitute prima facie evidence that they intended to defraud the government and should therefore be liable under the statute. As their accountant, you know that TidyCo has a deficit in both its accumulated and current E&P accounts and that this deficit has existed over the entire...
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...ASSIGNMENT 3 1. Legal forms of business in Malaysia. Start up Business in Malaysia - What is a business firm? Business firms can be either of these two types: 1. Sole proprietor/ Sole trader - Sole proprietor is a business carried out in the name of an individual. 2. Partnerships (governed by Partnership Act 1961) - Partnership is a business owned by two or more individuals. Both these types of business firms have no separate legal existence apart from the persons who owns the business and properties cannot be held under the name of the business firms. All contracts are signed in the name of the individuals who own the business and their liability is unlimited. Forms of business formation in Malaysia | Company | Partnership | Sole-proprietorship | 1. | StructureA company is a person separate from its members. | Two or more persons carrying on business with a view of profit. | Individual in business on his own. | 2. | RegistrationNeed to be registered with the Registrar of Companies as a company. | Need to register their business under the Registration of Businesses Act, 1956. | Needs to register his business under the Registration of Businesses Act, 1956. | 3. | TransferabilityShares in a company are generally transferable although the right of transfer may be restricted. | Generally, a partner cannot transfer his status as partner to someone else without the consent of all the other partners. | A sole-proprietor may transfer his business to someone...
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...Federal Income Taxation SPRB12 - Sec B Professor James Shimko Tax File Memorandum Nino Giorgobiani May 16, 2012 May 14th, 2011 Tax File Memorandum From Nino Giorgobiani Subject Peaceful Pastures Funeral Home, Inc. Taxpayer Engagement Today I met with Peaceful to discuss the IRS audit notice they received in regards to their reported income. They want to know whether the amounts prepaid under Peaceful’s program constitutes prepaid income that must be included in Peaceful’s income in the year in which it was received. Facts Peaceful is an accrual basis taxpayer; they provide a full line of funeral services and sell related goods as well. Over the years their cost of goods sold increased and customers have not been able to afford their services. For this reason, they came up with an approach where customers are able to prepay for their funeral goods and services. Under the contract, the payments are refundable any time until the goods and services are provided to them. Peaceful does not report payments received in advance as income until the year in which the services are provided. Issue Should the prepaid income be included in the year in which it was received or in the year when the services are provided Conclusion Peaceful should not have to report prepaid income in the year received, they should report income when the services are provided. Analysis According to Comm. v. Indianapolis Power and Co & Light Co., (65 AFTR 2d 90-394) the opinion was...
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...Memorandum- CPA Report Vincent Mokwenye ACCA 545- Financial Reporting Monday December 18, 2012 Memorandum- CPA Report MEMORANDUM Date: December10, 2012 To: Libby Grimes Re: CPA Report In response to your request for information, this memo will address the methodology used to determine deferred taxes, the various procedures used for reporting accounting changes and error corrections, and the rationale for establishing the subsidiary as a corporation. In addition it will address our professional responsibilities are as a Certified Public Accountants (CPA’s) and finally distinguish between a financial audit and a financial review. The Methodology used to Determine Deferred Taxes The accounting for tax liability is governed by the internal revenue service (IRS) code whereas income statement financial reporting is done according the generally accepted accounting principles (GAAP). The taxable income reported to the IRS is based on the cash basis accounting whereas the pre-tax profit reported in the income statement to the stockholders is prepared using the accrual accounting. As a result, there is a difference between the tax liability reported to the IRS and the tax expense reported in the income statement. This causes the book income reported to stockholders to be different from the tax income reported to the IRS. If certain revenues and/or expenses are reported in different years in income statements and on income tax returns, an asset or liability called...
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...Tax Return Position Paper ACC/455 The techniques in use for creating individual and business tax return transactions follow guidelines and rulings set forth under the tax law. The Internal Revenue Code (IRC) of 1939, which contains Title 26 of the United States Code, is the foundations of the tax law (Anderson, Pope, & Kramer, 2010). Ever since its establishment numerous revisions have been applied. The tax law entails primary and secondary sources, substantial authority. This paper will illustrate these sources, the role of the courts and the Internal Revenue Service in interpreting and applying the sources of tax law. This information will aid in preparing tax returns. The primary source of tax law comprises the Internal Revenue Code; tax court decisions, income tax treaties, and Public laws. Along with the aforementioned one believes that the legislative process is also another primary source of the tax law. This source starts in the House of Representative the first step is the proposal of new tax bill, the bill receives votes determining whether or not to integrate the proposal of a tax bill. A tax law primary source also includes Treasury Regulations; these regulations are rules and regulations in use by the IRS to implement the laws of the Internal Revenue Code. Treasury Regulations can be proposed, temporary, or final. There are also other rulings and regulations from the IRS that support the IRC such as revenue ruling, revenue...
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...B40.2345 Tony Marciano amarcian@stern.nyu.edu KMC 9-87 First Class Assignment For the first class meeting, I will expect you to prepare the INTEL case in your course packet. You should use the detailed questions given in the course packet to organize your thoughts and analysis about the case. Our class discussion will cover the issues raised by the questions, i.e.: (i) What capital structure makes sense? (ii) What would be the best way to disburse cash? (iii) Describe the advantages and disadvantages of each alternative considered by management? In addition to reading and analyzing the Intel case, you should come to class with a one to two page memorandum that summarizes your analysis. You may team up with one or two classmates and hand in one memorandum for the group. (I.e., I will accept a memorandum with up to, but not more than, three names on it.) Stern School of Business New York University Cases in Corporate Finance Marciano Tony Course Syllabus TENTATIVE I. Course Materials A. Packet I (Required): 1. Syllabus 2. Assignments 3. Cases 4. Readings B. Text (Very Highly Recommended but probably have it already): Brealey Myers Allen, Principles of Corporate Finance, McGraw Hill. (BM) You may already have this text. C. There will be some miscellaneous handouts during the course. AND THERE ARE FILES ON BLACKBOARD WHICH CONTAIN SPREADSHEETS FOR THE CASES WE WILL ANALYZE IN THE COURSE. EACH SPREADSHEET CONTAINS ONE OR MORE OF THE EXHIBITS...
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...Research Problem 3. Millie owns a large home on the East Coast. Her home is surrounded by large, mature oak trees that significantly increase the value of her home. In August 2014, a hurricane damaged many of the trees surrounding her home. In September 2014, Millie engaged a local arborist to evaluate and treat the trees, but five of the largest trees were seriously weakened by the storm. These trees died from disease in 2015. Millie has ascertained that the amount of the casualty loss from the death of the five trees is $25,000; however, she is uncertain in which year to deduct this loss. Prepare a Tax File memo and a client letter to discuss whether the casualty loss should be deducted in the calculation of Millie’s 2014 or 2015 taxable income. Partial list of research aids: Reg. § 1.165–1. Oregon Mesabi Corporation, 39 B.T.A. 1033 (1939). Dear Millie, This letter provides you with our firm’s opinion regarding the tax consequences of the casualty loss from withstanding the severe hurricane damage as determined by the Internal Revenue Service. More specifically, does the casualty loss entitle Millie a deduction for the five oak trees in 2014 or 2015? In my research, I found that Millie is entitled to claim a deduction for the casualty loss resulting from hurricane damage (2014) in 2015. I found a case that had circumstances that were almost identical to your situation. In that case the casualty loss was deductible throughout each year it was ascertain there was...
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...Memorandum to the File Date: August 1, 20XX From: Carie Ford Re: Summarize the tax issue/purpose of the memo. Background Provide a concise yet complete overview of facts/background. Issue State the issue(s) in question format. Authoritative Guidance List all authoritative guidance used to form conclusion and analysis. Refer to p. 718 in your tax textbook for citation reference guidance. Analysis Discuss each issue separately. Describe the logical, defendable, legal alternatives to each issue/problem. Provide support and detail for your reasoning. Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx. Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx. Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx...
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...MEMORANDUM To: Galadriel and John, owner of Marietta Horse Supplies From: Subject: Potential Liability for Accumulated Earnings Tax, and Level of Salaries FACTS Galadriel and John, under you, are owners of Marietta Horse Supplies, C Corp. The company has garnered enough earnings enabling the owners to pay reasonable salaries, although research revealed that the salary level is about one-half or two-thirds of salaries paid by other horse supply businesses with similar size. Owners claim that the lower compensation level was to satisfy the needs of business, i.e., inventories. Past two years, the owners set up lines of credit with two local banks. The owners claim they never had time to review the level of their salaries. PROBLEMS An IRS agent contacted Galadriel and John about items in their tax returns. Having three past tax returns have been examined, the IRS agent proposed a settlement for the items in question. The IRS agent’s concern is Marietta Horse Supplies has unreasonable accumulated earnings. Galadriel and John may be subject to the accumulated earnings tax. ANALYSIS The fact that Marietta Horse Supplies has paid the owners with salaries and lack of presence of compensations paid in forms of dividends may be deemed as contrary to reasonable accumulation of earnings and as tax avoidance attempt, as stated in Sec. 532 (a). However, Galadriel and John shall provide proof to justify the business needs of its accumulation of earnings under...
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...An Updated Guide to Establishing a Subsidiary in India by fred m. greguras, s.r. gopalan and steven s. levine Businesses in the U.S. continue to move a portion of their development, support and other operations offshore to India, primarily for cost-saving reasons. Venture capital investors may require such outsourcing in order to reduce a company’s burn rate. While a U.S. company may initially contract for services with a third party in India, many companies establish their operations in India through incorporation of a subsidiary, a private limited company under the India Companies Act of 1956, as amended (the “Companies Act”). This memorandum summarizes certain of the legal and administrative issues that a U.S. company (the “U.S. company”) should consider in establishing an Indian subsidiary. Where to Locate the Subsidiary A key factor is the availability of a reliable employee pool with required skill sets for the services. Many U.S. software companies have established a subsidiary in Bangalore in the State of Karnataka because of its skilled work force, communications infrastructure and business friendly environment. On the other hand, Hyderabad is the center of life sciences activity in India. U.S. companies are increasingly considering establishing operations in locations other than Bangalore, such as in the cities of Pune and Chennai, that have lower costs, less competition for employees and a less mobile workforce. Employee benefits and other indirect and direct expenses...
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...University of Wisconsin, Madison, Wisconsin Brett Jones is a senior accountant with the accounting firm of BGW. On a recent audit engagement, Brett was assigned the task of evaluating the deferred tax accounting for Packer Inc. The company, founded in 1962, is a large heavy machinery manufacturer. Packer’s balance sheet at December 31, 1997 includes a deferred tax asset of approximately $22 million related to net future deductible temporary differences. However, realization of the deferred tax asset is dependent upon profitable operations in the U.S. and abroad, and future reversals of existing temporary differences. Although realization is not assured, Packer management in the past has been pretty sure that such benefits will be realized through the reduction of future taxable income. Management has carefully considered various factors in assessing the probability of realizing these deferred tax benefits. Brett recalls the complexity surrounding the judgmental nature of accounting for deferred taxes under generally accepted accounting principles. Under Statement of Financial Accounting Standard No. 109 (FAS 109), Packer could be required to record a deferred tax asset for future deductible amounts and carry-forwards and record a valuation allowance, if it is likely that the tax asset will not be realized. Brett also recalls that FAS 109 provides some examples of negative evidence to support recording a valuation allowance, and positive evidence to avoid recording a valuation...
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...CHAPTER 12 S CORPORATIONS SOLUTIONS TO PROBLEM MATERIALS | | | | |Status: | | Q/P | |Question/ | | | |Present | |in Prior | |Problem | |Topic | |Edition | |Edition | | | | | | | | |1 | |Partnerships versus S corporations | |New | | |2 | |Restrictions | |New | | |3 | |S election versus LLC | |Unchanged |1 | |4 | |Use of a qualified Subchapter S subsidiary | |Unchanged |3 | |5 | |Reelection after termination | |Unchanged |4 | |6 | |Passive investment income | |Unchanged |5 | |7 | |Schedule...
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